We’re off and running!  With Monday’s trade we completed the second and final leg of a butterfly spread at terrific prices.  By buying the November 300-310 call spread for 2.10 when AAPL was plummeting earlier in the week, and then shorting the 310-320 call spread when AAPL soared yesterday, we effectively legged into the November 300-310-320 butterfly spread twice for a debit of just 0.20. Our position can do no worse than lose $40 plus commissions, but it has the potential to produce gains of as much as $2000.  Also, we can expect to profit over a very wide range of prices come mid-November — anything above $296 or so.  Keep in mind that my original price target for the stock was $315.32, and if it heads there before the November calls expire, we will reap substantial gains — especially relative to the $40 risk we are taking.

I offered this gambit in order to help traders, including novices, get over the idea that options are just too complicated, risky and difficult to mess with.  Although butterfly spreads are indeed arcane (even to many stockbrokers), and although they are rarely used by retail customers because they generate relatively high commissions, I wanted to prove that it’s possible to beat the game anyway. Now, we have a very good chance of doing so, mainly because we were able to use Hidden Pivots to nail a big swing in the underlying stock precisely.  And because our risk is limited to $40 plus commissions, we can simply forget about this position until such time as AAPL advances toward our rally target.